EUROPEAN FIXED UPDATE: Modest moves to a surprise jobless claims release

USTs: +7 ticks, 112-28

• A firmer start to the day with the risk tone weak throughout the European morning and despite sentiment finding a bit of a floor, as stocks/futures came off worst and XAU briefly went below USD 4k/oz, fixed income continues to climb.
• USTs at a 112-19 peak, posting gains of nine ticks at most. Eclipsing Monday’s 112-24+ best but stopping just shy of a cluster from last week between 113-01+ to 113-04+. Upside this morning was also spurred by a surprise release from the Department of Labour, jobless claims at 232k in the October 18th week and continuing at 1.957mln (prev. 1.947mln); no direct comparison to initial, the last release was 219k for the week of September 20th.
• Notably, the move in US fixed income assets to the release was fairly muted in nature. Potentially a function of participants awaiting more timely series and/or the hard data to begin to be released in the next few days and weeks before reassessing their position in December.
• Nonetheless, the series shows the labour market deteriorated across the shutdown and factors in favour of the dovish-side of the argument into December, c. 10bps of easing currently implied.
• Ahead, we get the latest ADP series (not the BLS reference period), a handful of other prints and remarks from Fed’s Barr (voter) and Barkin (2026) on supervision and the economic outlook respectively.

Bunds: +22 ticks, 128.86

• Bid, in-fitting with the above. Lifted across the early European morning before seeing a bit of a pullback just after the cash equity open and in proximity to the time of the discussed US jobless claims series.
• A pullback that was possibly a function of cash equity benchmarks opening slightly better than futures had implied at their worst and/or participants being caught off guard by the DOL release. Furthermore, it may be a factor of/speak to the divergence between the ECB and Fed in terms of their policy trajectory; as the ECB is likely at the terminal point while the Fed could, if market pricing proves correct, have over 75bps of easing yet to deliver.
• Irrespective of the driver, the move proved fleeting and within earlier parameters.
• Since, Bunds have resumed their climb and are towards highs of 128.90 a the European tone remains subdued overall and the fixed income complex generally moves higher.
• If the move continues, we look to last week's 128.97 peak as the next point of resistance.

Gilts: +17 ticks, 92.56

• In-fitting with the above. At the top-end of a 92.41 to 92.60 bound. Specifics for the UK light today, as we count down to Wednesday’s CPI release for confirmation that inflation has peaked and early insight into the December meeting.
• UK specifics remain focused on the budget, and while there have been a handful of pertinent updates, primarily relating to domestic banking names, nothing has emerged to significantly change the narrative for rates at this point in time.